Hess Reports Estimated Results for the Third Quarter of 2019

Key Developments:

The Liza Destiny floating production, storage and offloading vessel (FPSO) arrived at the Stabroek Block (Hess – 30 percent), offshore Guyana, in late August; production from Phase 1 is now targeted to startup in December 2019

A 14th discovery was announced on the Stabroek Block at the Tripletail-1 exploration well located approximately 3 miles northeast of the Longtail discovery; the Tripletail discovery adds to the previously announced estimate of gross discovered recoverable resources on the Stabroek Block of more than 6 billion barrels of oil equivalent

A discovery was announced at the Esox-1 exploration well in the Gulf of Mexico that will be a tie-back to the Tubular Bells production facilities; first oil is expected in the first quarter of 2020

Hess Corporation will receive approximately $275 million in cash and will own approximately 134 million units, or 47 percent, of Hess Midstream upon closing of its proposed acquisition of Hess Infrastructure Partners LP, expected in the fourth quarter of 2019

Financial and Operational Highlights:

Net loss was $205 million, or $0.68 per common share, compared with a net loss of $42 million, or $0.18 per common share, in the third quarter of 2018

Adjusted net loss1 was $98 million, or $0.32 per common share, compared with adjusted net income of $29 million, or $0.06 per common share, in the third quarter of last year

Oil and gas net production averaged 290,000 barrels of oil equivalent per day (boepd), excluding Libya, up from 279,000 boepd in the third quarter of 2018; Bakken net production was 163,000 boepd, up 38 percent from 118,000 boepd in the prior-year quarter

Exploration and Production (E&P) capital and exploratory expenditures were $661 million, compared with $542 million in the prior-year quarter

Cash and cash equivalents, excluding Midstream, were $1.9 billion at September 30, 2019

2019 Updated Full Year Guidance:

Net production guidance, excluding Libya, increased to approximately 285,000 boepd, up from the previous guidance range of 275,000 boepd to 280,000 boepd; Bakken net production guidance increased to approximately 150,000 boepd, up from the previous guidance range of 140,000 boepd to 145,000 boepd

E&P capital and exploratory expenditures are projected to be $2.7 billion, down from previous guidance of $2.8 billion

NEW YORK–(BUSINESS WIRE)–Hess Corporation (NYSE: HES) today reported a net loss of $205 million, or $0.68 per common share, in the third quarter of 2019, compared with a net loss of $42 million, or $0.18 per common share, in the third quarter of 2018. On an adjusted basis, the Corporation reported a net loss of $98 million, or $0.32 per common share, in the third quarter of 2019, compared with an adjusted net income of $29 million, or $0.06 per common share, in the prior-year quarter. The decrease in after-tax adjusted results primarily reflects lower realized selling prices, partially offset by reduced exploration expenses.

“We achieved strong operational performance once again this quarter, delivering higher production and lower capital and exploratory expenditures than previous guidance,” Chief Executive Officer John Hess said. “In September, we announced our 14th discovery in the Stabroek Block at Tripletail, offshore Guyana and are now targeting December for first oil from the Liza-1 development. We also just announced an oil discovery at the Esox-1 well, part of our focused exploration program in the deepwater Gulf of Mexico, which will be a low cost, high return tieback to Tubular Bells production facilities.”

After-tax income (loss) by major operating activity was as follows:

Three Months Ended

Nine Months Ended

September 30,

September 30,

(unaudited)

(unaudited)

2019

2018

2019

2018

(In millions, except per share amounts)

Net Income (Loss) Attributable to Hess Corporation

Exploration and Production

$

(53

)

$

50

$

124

$

56

Midstream

39

30

111

88

Corporate, Interest and Other

(191

)

(122

)

(414

)

(422

)

Net income (loss) attributable to Hess Corporation

$

(205

)

$

(42

)

$

(179

)

$

(278

)

Net income (loss) per common share (diluted) (a)

$

(0.68

)

$

(0.18

)

$

(0.61

)

$

(1.04

)

Adjusted Net Income (Loss) Attributable to Hess Corporation

Exploration and Production

$

(34

)

$

109

$

121

$

142

Midstream

39

30

111

88

Corporate, Interest and Other

(103

)

(110

)

(326

)

(329

)

Adjusted net income (loss) attributable to Hess Corporation

$

(98

)

$

29

$

(94

)

$

(99

)

Adjusted net income (loss) per common share (diluted) (a)

$

(0.32

)

$

0.06

$

(0.33

)

$

(0.44

)

Weighted average number of shares (diluted)

302.5

294.3

300.7

300.4

(a)

Calculated as net income (loss) attributable to Hess Corporation less preferred stock dividends, divided by weighted average number of diluted shares.

Exploration and Production:

E&P net loss was $53 million in the third quarter of 2019, compared with net income of $50 million in the third quarter of 2018. On an adjusted basis, third quarter 2019 net loss was $34 million, compared with net income of $109 million in the prior-year quarter. The Corporation’s average realized crude oil selling price, including the effect of hedging, was $56.03 per barrel in the third quarter of 2019, versus $66.08 per barrel in the prior-year quarter. The average realized natural gas liquids (NGLs) selling price in the third quarter of 2019 was $9.41 per barrel, versus $24.29 per barrel in the prior-year quarter, while the average realized natural gas selling price was $3.81 per mcf, compared with $4.11 per mcf in the third quarter of 2018.

Net production, excluding Libya, was 290,000 boepd in the third quarter of 2019, up from third quarter 2018 net production of 279,000 boepd, or 269,000 boepd excluding assets sold. The higher production was primarily driven by the Bakken, partially offset by hurricane-related downtime in the Gulf of Mexico and increased planned downtime at the Malaysia/Thailand Joint Development Area (JDA). Libya net production was 22,000 boepd in the third quarter of 2019, compared with 18,000 boepd in the prior-year quarter.

Excluding items affecting comparability of earnings between periods, cash operating costs, which include operating costs and expenses, production and severance taxes, and E&P general and administrative expenses, were $12.13 per boe in the third quarter, compared with $11.41 per boe in the prior-year quarter, reflecting higher planned workover activity and the impact from selling our joint venture interests in the Utica natural gas shale play in the third quarter of 2018. Income tax expense is comprised primarily of taxes in Libya.

Operational Highlights for the Third Quarter of 2019:

Bakken (Onshore U.S.): Net production from the Bakken increased 38 percent to 163,000 boepd from 118,000 boepd in the prior-year quarter, with net oil production up 26 percent to 96,000 barrels of oil per day (bopd) from 76,000 bopd in the year-ago period, primarily due to increased drilling activity and new plug and perf completion design. Natural gas and NGL production were also higher due to the increased drilling activity, as well as additional natural gas captured with the start-up of the Little Missouri 4 natural gas processing plant in late July and additional NGLs received under percentage of proceeds contracts resulting from lower NGL commodity pricing. The Corporation operated six rigs in the third quarter, drilling 41 wells, completing 43 wells and bringing 33 new wells online. Full year net production for the Bakken is expected to be approximately 150,000 boepd, which is up from the previous guidance range of 140,000 boepd to 145,000 boepd.

Gulf of Mexico (Offshore U.S.): Net production from the Gulf of Mexico was 59,000 boepd, compared with 71,000 boepd in the prior-year quarter, primarily reflecting hurricane-related downtime that reduced third quarter 2019 net production by approximately 6,000 boepd, as well as higher planned maintenance.

The Corporation announced a discovery at the operated Esox-1 exploration well in Mississippi Canyon Block No. 726 (Hess – 57 percent), which was drilled to a depth of 4,609 feet and encountered approximately 191 feet of net pay in high-quality Miocene reservoirs. The well will be completed and tied back to the Tubular Bells production facilities, with first oil expected in the first quarter of 2020.

Guyana (Offshore): At the Stabroek Block, the operator, Esso Exploration and Production Guyana Limited, announced a 14th discovery at the Tripletail-1 exploration well, which encountered approximately 108 feet of high-quality oil-bearing sandstone reservoir and is located approximately 3 miles northeast of the Longtail discovery. Additional hydrocarbon bearing reservoirs were subsequently encountered below the previously announced Tripletail discovery, which are still under evaluation.

The Liza Phase 1 development is now targeted to commence production in December of this year and will produce up to 120,000 gross bopd utilizing the Liza Destiny FPSO, which arrived in Guyana on August 29, 2019. The Liza Phase 2 development was sanctioned in May 2019 and will use the Liza Unity FPSO to produce up to 220,000 gross bopd, with first oil expected by mid-2022. Pending government approvals, a third development, Payara, is expected to produce up to 220,000 bopd with startup in 2023.

Exploration and development drilling activities continue on the Stabroek Block. After completion of operations at Tripletail, the Noble Tom Madden drillship will next drill the Uaru-1 exploration well, located approximately 10 miles east of the Liza-1 well. The Stena Carron drillship is continuing drilling and evaluation activity at Ranger-2. The drillship will next conduct a production test at Yellowtail-1. The Noble Bob Douglas drillship is currently conducting development drilling operations for the Liza Phase 1 project. A fourth drillship, the Noble Don Taylor, is expected to arrive in Guyana in November 2019 and will drill the Mako-1 exploration well located approximately 6 miles south of the Liza-1 well.

Midstream:

The Midstream segment, comprised primarily of Hess Infrastructure Partners LP (HIP), our 50/50 midstream joint venture, had net income of $39 million in the third quarter of 2019, compared with net income of $30 million in the prior-year quarter.

In October 2019, Hess Midstream Partners LP (HESM) announced it will acquire HIP, including HIP’s 80 percent interest in HESM’s oil and gas midstream assets, HIP’s water services business and the outstanding economic general partner interest and incentive distribution rights in HESM. In addition, HESM’s organizational structure will convert from a master limited partnership into an “Up-C” structure in which HESM’s public unitholders will receive newly issued securities in a new public entity to be named “Hess Midstream LP” (Hess Midstream). Upon completion of the transaction, Hess Corporation will receive approximately $275 million in cash and will own approximately 134 million HESM units, or 47 percent of Hess Midstream on a consolidated basis. The transaction, which is non-taxable to Hess Corporation, is expected to close in the fourth quarter of 2019, subject to customary closing conditions and regulatory approvals.

Corporate, Interest and Other:

After-tax expense for Corporate, Interest and Other was $191 million in the third quarter of 2019, compared with $122 million in the third quarter of 2018. On an adjusted basis, after-tax expense was $103 million in the third quarter of 2019, compared with $110 million in the prior-year quarter.

Capital and Exploratory Expenditures:

E&P capital and exploratory expenditures were $661 million in the third quarter of 2019, compared with $542 million in the prior-year quarter, primarily reflecting increased drilling in the Bakken and greater activity in Guyana.

Midstream capital expenditures were $112 million in the third quarter of 2019, up from $83 million in the prior-year quarter. Midstream investments in its 50/50 joint venture with Targa Resources were $10 million in the third quarter of 2019, compared with $26 million in the prior-year quarter.

Liquidity:

Excluding the Midstream segment, Hess Corporation had cash and cash equivalents of $1.9 billion and debt and finance lease obligations totaling $5.6 billion at September 30, 2019. The Midstream segment had cash and cash equivalents of $7 million and total debt of $1,152 million at September 30, 2019. The Corporation’s debt to capitalization ratio, including finance leases, was 40.0 percent at September 30, 2019 and 38.0 percent at December 31, 2018.

Net cash provided by operating activities was $443 million in the third quarter of 2019, up from $423 million in the third quarter of 2018. Net cash provided by operating activities before changes in operating assets and liabilities2 was $522 million in the third quarter of 2019, compared with $681 million in the prior-year quarter. Changes in operating assets and liabilities were a net outflow of $79 million in the third quarter of 2019 and a net outflow of $258 million in the year-ago quarter.

Items Affecting Comparability of Earnings Between Periods:

The following table reflects the total after-tax income (expense) of items affecting comparability of earnings between periods:

Three Months Ended

Nine Months Ended

September 30,

September 30,

(unaudited)

(unaudited)

2019

2018

2019

2018

(In millions)

Exploration and Production

$

(19

)

$

(59

)

$

3

$

(86

)

Midstream

—

—

—

—

Corporate, Interest and Other

(88

)

(12

)

(88

)

(93

)

Total items affecting comparability of earnings between periods

$

(107

)

$

(71

)

$

(85

)

$

(179

)

Third Quarter 2019: Corporate, Interest & Other included a noncash charge to recognize unamortized pension actuarial losses of $88 million ($88 million after-tax) resulting from the purchase of a single premium annuity contract using funds of the pension plan to settle a portion of the plan’s benefit obligations. The charge is included in Other, net nonoperating income in the income statement. E&P results included a pre-tax charge of $21 million ($19 million after-tax) related to a settlement on historical cost recovery balances in the JDA that will be paid in cash. The charge is included in Marketing, including purchased oil and gas in the income statement.

Third Quarter 2018: E&P results included a pre-tax charge of $73 million ($73 million after-tax) in connection with vacated office space, of which $57 million is included in General and administrative expenses and $16 million is included in Depreciation, depletion and amortization in the income statement. In addition, E&P results included a pre-tax gain of $14 million ($14 million after-tax) from the sale of our joint venture interests in the Utica shale play. As required under accounting standards, Corporate, Interest and Other results included an allocation of noncash income tax expense of $12 million to offset the recognition of a noncash income tax benefit recorded in other comprehensive income resulting from changes in fair value of crude oil hedge contracts.

Reconciliation of U.S. GAAP to Non-GAAP measures:

The following table reconciles reported net income (loss) attributable to Hess Corporation and adjusted net income (loss):

Hess Corporation will review third quarter financial and operating results and other matters on a webcast at 10 a.m. today (EDT). For details about the event, refer to the Investor Relations section of our website at www.hess.com.

HessCorporationis a leading global independent energy company engaged in the exploration and production of crude oil and natural gas. More information on Hess Corporation is available atwww.hess.com.

Forward-looking Statements

Certain statements in this release may constitute “forward-looking statements” within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Forward-looking statements are subject to known and unknown risks and uncertainties and other factors which may cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, uncertainties inherent in the measurement and interpretation of geological, geophysical and other technical data. Estimates and projections contained in this release are based on the Corporation’s current understanding and assessment based on reasonable assumptions. Actual results may differ materially from these estimates and projections due to certain risk factors discussed in the Corporation’s periodic filings with the Securities and Exchange Commission (SEC) and other factors.

Non-GAAP financial measures

The Corporation has used non-GAAP financial measures in this earnings release. “Adjusted net income (loss)” presented in this release is defined as reported net income (loss) attributable to Hess Corporation excluding items identified as affecting comparability of earnings between periods. “Net cash provided by (used in) operating activities before changes in operating assets and liabilities” presented in this release is defined as Net cash provided by (used in) operating activities excluding changes in operating assets and liabilities. Management uses adjusted net income (loss) to evaluate the Corporation’s operating performance and believes that investors’ understanding of our performance is enhanced by disclosing this measure, which excludes certain items that management believes are not directly related to ongoing operations and are not indicative of future business trends and operations. Management believes that net cash provided by (used in) operating activities before changes in operating assets and liabilities demonstrates the Corporation’s ability to internally fund capital expenditures, pay dividends and service debt. These measures are not, and should not be viewed as, a substitute for U.S. GAAP net income (loss) or net cash provided by (used in) operating activities. A reconciliation of reported net income (loss) attributable to Hess Corporation (U.S. GAAP) to adjusted net income (loss), and a reconciliation of net cash provided by (used in) operating activities (U.S. GAAP) to net cash provided by (used in) operating activities before changes in operating assets and liabilities are provided in the release.

Cautionary Note to Investors

We use certain terms in this release relating to resources other than proved reserves, such as unproved reserves or resources. Investors are urged to consider closely the oil and gas disclosures in Hess Corporation’s Form 10-K, File No. 1-1204, available from Hess Corporation, 1185 Avenue of the Americas, New York, New York 10036 c/o Corporate Secretary and on our website at www.hess.com. You can also obtain this form from the SEC on the EDGAR system.

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

Third

Third

Second

Quarter

Quarter

Quarter

2019

2018

2019

Income Statement

Revenues and non-operating income

Sales and other operating revenues

$

1,580

$

1,793

$

1,660

Gains (losses) on asset sales, net

—

14

22

Other, net

(65

)

21

15

Total revenues and non-operating income

1,515

1,828

1,697

Costs and expenses

Marketing, including purchased oil and gas

423

491

477

Operating costs and expenses

321

266

285

Production and severance taxes

47

47

46

Exploration expenses, including dry holes and lease impairment

40

169

43

General and administrative expenses

90

143

89

Interest expense

90

99

97

Depreciation, depletion and amortization

544

489

494

Total costs and expenses

1,555

1,704

1,531

Income (loss) before income taxes

(40

)

124

166

Provision (benefit) for income taxes

119

121

132

Net income (loss)

(159

)

3

34

Less: Net income (loss) attributable to noncontrolling interests

46

45

40

Net income (loss) attributable to Hess Corporation

(205

)

(42

)

(6

)

Less: Preferred stock dividends

—

11

—

Net income (loss) attributable to Hess Corporation common stockholders

$

(205

)

$

(53

)

$

(6

)

HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)

(IN MILLIONS)

Nine Months Ended September 30,

2019

2018

Income Statement

Revenues and non-operating income

Sales and other operating revenues

$

4,812

$

4,673

Gains (losses) on asset sales, net

22

32

Other, net

(23

)

79

Total revenues and non-operating income

4,811

4,784

Costs and expenses

Marketing, including purchased oil and gas

1,308

1,299

Operating costs and expenses

872

842

Production and severance taxes

132

128

Exploration expenses, including dry holes and lease impairment

117

271

General and administrative expenses

266

382

Interest expense

285

300

Loss on debt extinguishment

—

53

Depreciation, depletion and amortization

1,536

1,350

Total costs and expenses

4,516

4,625

Income (loss) before income taxes

295

159

Provision (benefit) for income taxes

345

308

Net income (loss)

(50

)

(149

)

Less: Net income (loss) attributable to noncontrolling interests

129

129

Net income (loss) attributable to Hess Corporation

(179

)

(278

)

Less: Preferred stock dividends

4

34

Net income (loss) attributable to Hess Corporation common stockholders